Diesel prices continued their downward trend, with prices falling for the fourth straight week, according to data released this week by the Department of Energy’s Energy Information Administration (EIA).

Average diesel prices for the week of September 6 at $2.931 per gallon were down 0.7 cents from the week of August 30. Prices have been heading down since reaching $2.991 the week of August 9, according to EIA data.

Even with the decline over the last four weeks, the current average price per gallon of diesel is 28.4 cents higher than a year ago, and prices have been below the $3 per gallon mark for the past 15 weeks. And the current average price per gallon of diesel is 19.6 cents below the 2010 weekly high of $3.127 per gallon from the week of May 10.

The most recent prices match up with the EIA’s recent Short Term Energy Outlook, which is now calling for 2010 average diesel prices to be $2.93 per gallon and $3.10 in 2011.
As for oil prices, the EIA is calling for 2010 crude oil prices to hit $79.13 per barrel and 2011 prices at $83.50 per barrel. This is below current oil prices, which are at $73.51 (as of press time). Various report have indicated current oil prices have been due to higher inventories which is a sign of weaker demand and slowing economic growth. Another reason for declining prices is that summer driving season is over, which means fewer people are driving.

A recent Bloomberg report noted that oil prices have slipped six percent in the last month and have increased six percent in the last year. It added that oil stockpiles probably rose 1 million barrels last week from 361.7 million in the week ended Aug. 27 (official data was not available at press time).

As LM has reported, even though diesel prices appear to be in check for the time being, freight transportation stakeholders maintain that there is no real rhyme or reason when it comes to assessing the string of rising and falling fuel prices.

Some experts say that the there has never been a period of volatility in fuel prices like there has been in the last year. And with prices currently down by no means indicates prices will stay down or sharply go up.

If diesel prices do remain down, it is likely to have a significant impact on both shippers and carriers. But with the amount of volatility regarding fuel prices, the direction prices eventually head in is uncertain.

A shipper recently told LM that when it becomes time to negotiate rates, carriers will be talking a lot about the cost of fuel and using it as a leverage point for general rate and line haul increases. And because of this, the shipper explained that shippers must be acutely aware of what percentage of their invoice cost is actual fuel surcharge.

September 8, 2010

About the Author

Jeff Berman, Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman

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